Weddings with Uncertain Prospects – Mergers under Asymmetric Information

We provide a framework for analyzing bilateral mergers when there is two-sided asymmetric information about firms’ types. We show that there is always a "no-merger" equilibrium where firms do not consent to a merger, irrespective of their type. There may also be a "cut-off" equilibrium if the expected merger returns satisfy a suitable single crossing condition, which will hold if a firm’s merger returns are "essentially monotone decreasing" in its type. Applying our analysis to the linear Cournot model, we show how the merger pattern depends on the cost effects of mergers, the extent of uncertainty, and the way profits are split. Specifically, we show how increasing uncertainty about competitor types may foster mergers as firms hope for strong rationalization effects.merger, asymmetric information, oligopoly, single crossing

Integrating Industrial Organization and International Business to Explain the Cross-National Domestic Airline Merger Phenomenon

Lecture on the first SFB/TR 15 meeting, Gummersbach, July, 18 - 20, 2004The domestic airline merger phenomenon of the late 1980s and early 1990s sparked a great deal of Industrial Organization literature; yet, that literature neglected non-US merger activity and the potential for international competitive incentives. Using an International Business perspective to complement a primarily Industrial Organization analysis, I argue that factoring international competitive gains helps explain the domestic airline merger phenomenon. A Cournot model of airline competition illustrates the international incentives behind integrating domestic with international routes and behind acquiring domestic competitors. Further, comprehensive panel data tests also support large domestic networks and actual mergers improving the international competitiveness of airlines

New Image Statistics for Detecting Disturbed Galaxy Morphologies at High Redshift

Testing theories of hierarchical structure formation requires estimating the distribution of galaxy morphologies and its change with redshift. One aspect of this investigation involves identifying galaxies with disturbed morphologies (e.g., merging galaxies). This is often done by summarizing galaxy images using, e.g., the CAS and Gini-M20 statistics of Conselice (2003) and Lotz et al. (2004), respectively, and associating particular statistic values with disturbance. We introduce three statistics that enhance detection of disturbed morphologies at high-redshift (z ~ 2): the multi-mode (M), intensity (I), and deviation (D) statistics. We show their effectiveness by training a machine-learning classifier, random forest, using 1,639 galaxies observed in the H band by the Hubble Space Telescope WFC3, galaxies that had been previously classified by eye by the CANDELS collaboration (Grogin et al. 2011, Koekemoer et al. 2011). We find that the MID statistics (and the A statistic of Conselice 2003) are the most useful for identifying disturbed morphologies. We also explore whether human annotators are useful for identifying disturbed morphologies. We demonstrate that they show limited ability to detect disturbance at high redshift, and that increasing their number beyond approximately 10 does not provably yield better classification performance. We propose a simulation-based model-fitting algorithm that mitigates these issues by bypassing annotation.Comment: 15 pages, 14 figures, accepted for publication in MNRA

A Risk Management Model for Merger and Acquisitio

In this paper, a merger and acquisition risk management model is proposed for considering risk factors in the merger and acquisition activities. The proposed model aims to maximize the probability of success in merger and acquisition activities by managing and reducing the associated risks. The modeling of the proposed merger and acquisition risk management model is described and illustrated in this paper. The illustration result shows that the proposed model can help to screen the best target company with minimum associated risks in the merger and acquisition activity

Horizontal Mergers with Free Entry in Differentiated Oligopolies

Antitrust authorities view the possibility of entry as a key determinant of whether a proposed merger will be harmful to society. This paper examines the effects of horizontal mergers in models of non-localized, differentiated Bertrand oligopoly that allow for free entry. The analysis of the long run effects of mergers in differentiated products markets raises issues that are significantly different from those in the short run or in homogeneous products markets due to the introduction of new varieties. Our analysis reveals that determining the properties of consumer preferences is crucial to the antitrust analysis of mergers in differentiated products markets. Specifically, we show that if the demand system satisfies the Independence from Irrelevant Alternatives (IIA) property and if the number of firms is treated as a continuous variable, mergers in differentiated products markets have no long run effect on consumer welfare. Moreover, in this case, marginal cost savings are to a large extent irrelevant to the consumer welfare effects of mergers. If the number of firms is treated as a discrete variable, fixed or marginal cost savings are a necessary condition for mergers to have zero or positive effect on consumer welfare. Using the example of linear demand, we show that if the demand system does not satisfy the IIA property, mergers in differentiated products markets can harm consumer welfare in long run equilibrium. Moreover, the amount of harm increases with consumers’ taste for variety.Horizontal mergers; free entry; product differentiation; independence from irrelevant alternatives; antitrust policy

How important is the dark matter halo for black hole growth?

In this paper, we examine if the properties of central black holes in galactic nuclei correlate with their host dark matter halo. We analyze the entire sample of galaxies where black hole mass, velocity dispersion, sigma, and asymptotic circular velocity, Vc, have all been measured. We fit M-sigma and M-Vc to a power law, and find that in both relationships the scatter and slope are similar. This model-independent analysis suggests that although the black hole masses are not uniquely determined by dark matter halo mass, when considered for the current sample as a whole, the M-Vc correlation may be as strong (or as weak) as M-sigma. Although the data are sparse, there appears to be more scatter in the correlation for both sigma and Vc at the low--mass end. This is not unexpected given our current understanding of galaxy and black hole assembly. In fact, there are several compelling reasons that account for this: (i) SMBH formation is likely less efficient in low-mass galaxies with large angular momentum content; (ii) SMBH growth is less efficient in low-mass disk galaxies that have not experienced major mergers; (iii) dynamical effects, such as gravitational recoil, increase scatter preferentially at the low-mass end. Therefore, the recent observational claim of the absence of central SMBHs in bulgeless, low mass galaxies, or deviations from the correlations defined by high-mass black holes in large galaxies today is, in fact, predicated by current models of black hole growth. We show how this arises as a direct consequence of the coupling between dark matter halos and central black holes at the earliest epochs.Comment: ApJ, in pres

Profitable horizontal mergers without cost advantages: The role of internal organization, information, and market structure

Merged firms are typically rather complex organizations. Accordingly, me rger has a more profound effect on the structure of a market than simply reducing the number of competitors. We show that this may render horizontal mergers profitable and welfare – improving even if costs are linear. The driving force behind these results, which help to reconcile theory with various empirical findings, is the assumption that information about output decisions flows more freely within a merged firm. -- Unternehmensfusionen führen häufig zu komplexen Organisationen. Fusionen haben deshalb andere und tiefgründige Wirkungen auf die Marktstruktur. Sie reduzieren nicht einfach die Zahl der Wettbewerber in einem Markt, sondern durch Fusionen entstehen Wettbewerber, die sich wegen ihrer komplexen Organisationsstruktur anders verhalten als jedes der einzelnen Unternehmen vor der Fusion. Wir zeigen in dieser Arbeit, dass horizontale Fusion von Unternehmen aus diesen Gründen profitabel für die fusionierenden Unternehmen und wohlfahrtserhöhend wirken kann, selbst dann, wenn es durch die Fusion keinerlei Kostensynergien gibt. Der Schlüssel für dieses Ergebnis, das eine Theorie für eine Reihe von empirischen Befunden liefert, ist der verbesserte Informationsfluss zwischen Unternehmensteilen des durch die Fusion entstehenden Konzerns im Vergleich zum Informationsfluss zwischen unabhängigen Unternehmen.Merger,internal organizational structure,information,timing,market structure,Fusion,Organisationsstruktur,Informationsfluss,Marktstruktur

Mergers in Imperfectly Segmented Markets

We present a model with firms selling (homogeneous) products in two imperfectly segmented markets (a "high-demand" and a "low-demand" market). Buyers are mobile but restricted by transportation costs, so that imperfect arbitrage occurs when prices differ in both markets. We show that equilibria are distorted away from Cournot outcomes to prevent consumer arbitrage. Furthermore, a merger can lead to an equilibrium in which only the "high-demand" market is served. This is more likely (i) the lower consumers' transportation costs and (ii) the higher the concentration of the industry. Therefore, merger incentives are much larger than standard analysis suggests.Imperfect Market Segmentation, Oligopoly, Price Discrimination, Consumer Arbitrage, Mergers

PATENT LICENSING BY MEANS OF AN AUCTION: INTERNAL VS. EXTERNAL PATENTEE

An independent research laboratory owns a patented process innovation that can be licensed by means of an auction to two Cournot duopolists producing differentiated goods. For large innovations and close enough substitute goods the patentee auctions o¤ only one license, preventing the full diffusion of the innovation. For this range of parameters, however, if the laboratory merged with one of the firms in the industry, full technology diffusion would be implemented as the merged entity would always license the innovation to the rival firm. This explains that, in this context, a vertical merger is both profitable and welfare improving.Patent licensing, two-part tariff contracts, vertical mergers